Midterm 2 Wq08 Key

Midterm 2 WQ08 KEY

True / False Questions

|1.  |A bank with a negative repricing (or funding) gap faces reinvestment risk.  |

FALSE

|2.  |Duration is the weighted-average present value of the cash flows using the timing of the cash flows as weights.  |

FALSE

|3.  |Market risk management is important as a source of information on risk exposure for senior management.  |

TRUE

|4.  |Floating rate loans are less credit risky than fixed rate loans.  |

FALSE

|5.  |Comparing the loan mix of an individual FI to a national benchmark loan mix is useful in determining the extent that the individual FI may differ from an |

| |efficient portfolio composition.  |

TRUE

|6.  |The current market or contingent claims values of OBS items overestimates their notional value.  |

FALSE

|7.  |Contingent credit risk on derivative contracts is more serious for futures contracts than for forward contracts.  |

FALSE

|8.  |Agency conflicts occur when managers introduce new initiatives to achieve goals other than value maximization.  |

TRUE

|9.  |Most nonbank FIs have foreign exchange risk exposure that is smaller than the exposure of the large U.S. money-center banks.  |

TRUE

|10.  |The greater the volatility of foreign exchange rates given any net exposure position, the greater the fluctuations in value of the foreign exchange |

| |portfolio. ...